| NEWS
• eweek April 18, 2004
Why
the eMachines Model Is Paying Off
You're now the second largest Gateway shareholder [37.5 mill shares], but other than that you were not part of the reorg after the acquisition was made. What are you doing now? Nothing. (laughs) No, I'm just kidding. After this, and in the spirit of turning eMachines around, I'm actively looking for companies that are similar to eMachines. Something I can turn around and do something about. What kind of company are you looking for? [A company] that needs some restructuring and needs some direction so I can have a chance to turn it around. Are you sticking with the tech sector or considering companies outside the industry? Preferably in the tech sector. That's the only field I really know. Other fields I don't know that well. But of course, if it's not an area that requires a special expertise, I would consider it. Do you have any potential companies lined up? No. Honestly, the few that I'm interested in are in office supplies. Are you thinking U.S.-based? Preferably, yes, U.S.-based. You've said publicly that you first started thinking about acquiring Gateway back in 2002. My question is, the stock situation aside—that ts was trading at below cash value—what was it about Gateway that interested you the most? This is a very sensitive topic. I can tell you as much that at the time we believed we could contribute a lot to the situation. Because we were a very low-cost, low-overhead company. And we believed that Gateway's overhead was too high. If we entered into this, we would be able to turn the company around. So that was why we decided to go for it. But there must have been something. Gateway did have things to offer, but at the same time, in that 2002 timeframe, they were already moving toward their second year of losses. Revenues continued to decline. They continued to reduce their employee ranks, and all the while shipments were down. So I was just curious about what it was that you saw in them. And I have this short list of things that you may have been interested in and I wanted to get your feedback on. Was it customer base? They've got over 300 patents. Was it manufacturing? How about we do it this way-—I cite one example, which is public now. OK. Because at this time I really cannot talk, because Gateway is a public company and I am one of the largest shareholders and at this moment I am qualified as an insider, so it's difficult for me to discuss anything in detail. A good example is that from the very beginning my philosophy was that Gateway should close all the stores—based on the overhead. Because [overhead] is very costly. And so, obviously, they are now closing all their stores. So that was our belief from the very beginning—to reduce overhead significantly. But there are other reasons for the stores to be closed. … We'd save on sales tax, and it's very difficult to compete with the reseller. We view people like Best Buy and Wal-Mart [as resellers]; look how strong they are; how powerful they are in the retail area. It would be very difficult for Gateway to … compete with them. For example, if you are Apple there's lots of places to buy them. Everyone knows you're carrying Intel and Microsoft. They can easily go to the store, go shopping and buy [Intel and Microsoft] at Best Buy. And then you get into the situation of carrying the inventories, and that would defeat the purpose of having a mail-order company. It is interesting how this played out and how it was executed. I would like to emphasize that Ted [Waitt, chairman of Gateway] is still the chairman, and I have no role in the company at all. And Wayne [Inyoue, Gateway president and CEO] reports only to Ted. I don't talk to Wayne at all about business. So you're in no advisory capacity with Wayne. Absolutely not. Because he is the CEO and Ted is the chairman. He only reports to Ted. As a friend we talk, but other than that we don't talk business.
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